ACA Obligations Remain in Place Despite Court Ruling

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updated on December 31, 2018

Despite a new ruling by a federal judge in Texas that the Affordable Care Act (ACA) is unconstitutional, all ACA coverage and reporting obligations for employers remain in place.

The court's
ruling in
Texas v. United States "is sure to be appealed and will certainly land in the Supreme Court's lap again," said Edward Fensholt, senior vice president and director of compliance services at Lockton, a benefits brokerage and consultancy based in Kansas City, Mo.

"Nothing will change now or for the foreseeable future," said Tiffani Greene, an attorney with Fisher Phillips in Charlotte, N.C.

The ruling "is a declaratory judgment and not an injunction to freeze the ACA. This means at this point the ruling doesn’t impact anyone," explained Chatrane Birbal, director of policy engagement at the Society for Human Resource Management. "Compliance with the ACA’s employer mandate and employer-reporting requirements are still in effect and employers should continue to comply with these requirements until the Supreme Court upholds or overturns the recent decision.”

On Dec. 31, O'Connor
issued a stay that keeps the ACA in place while his ruling is appealed.

Legal Issues

District court judge Reed O'Connor ruled on Dec. 14 that because
Congress eliminated the penalty on individuals without ACA-compliant health coverage effective Jan. 1, 2019, the ACA's individual mandate requiring people to have health insurance "can no longer be sustained as an exercise of Congress's tax power." O'Connor then struck down the ACA in full, concluding the individual mandate is so connected to the law that Congress would not have passed the ACA without it.

The ruling by O'Connor, who was appointed to the bench by formerPresident George W. Bush, was a victory for 20 states with Republican attorneys general who brought the case against the ACA. A group of 17 Democratic attorneys general defended the law during the Texas litigation and have announced that they will do the same at the appellate court level.

When the case makes its way to the U.S. Supreme Court, "the reliably liberal block of the court, Justices Ginsberg, Breyer, Sotomayor and Kagan, are all expected to vote to uphold the ACA, as they did in 2012," when the Supreme Court ruled 5 to 4 that the ACA's individual mandate was constitutional, Fensholt said. In that decision, Chief Justice John Roberts unexpectedly joined with the court's liberals to uphold the ACA, and "it appears that—like in 2012—the fate of the ACA will once again be in the hands of Chief Justice Roberts," he predicted.

What happens next in the appeals process is not entirely clear, Fensholt noted. The district court's ruling doesn't take effect until 2019, "when the individual mandate tax goes away," he pointed out. The ruling, however, will be appealed to the Fifth Circuit Court of Appeals in New Orleans, which is likely to stay the Texas court's action against the ACA while the appeal is decided. After that, "no matter how the appeals court rules, the matter is certain to move on to the Supreme Court," Fensholt said.

Laurence Tribe, an ACA advocate who teaches constitutional law at Harvard Law School, wrote that "there is
every reason to believe that a strong, nonpartisan majority of justices" will uphold the law.

However, "No one can predict how an appeals court or the U.S. Supreme Court will treat this decision as the case winds its way up the judicial system on review," Greene said.

Even if the Supreme Court were to affirm the district court's ruling, many feel that the ACA's key protections would be quickly reinstated.

"The ACA has been fully woven into the fabric of the American health care system.
Pulling the emergency brake on the entirety of the law would be logistically impossible," blogged Josh Blackman, a professor at South Texas College of Law who closely follows ACA-related litigation.

With Democrats back in charge of the House of Representatives, Birbal expects to see legislation introduced in the next Congress "to preserve and defend the ACA, including proposals to reaffirm protections such as guaranteed renewability of coverage and the elimination of pre-existing conditions restrictions."

Blackman noted that a large majority of the public now supports protections for people with pre-existing conditions, and if the Supreme Court were to hold that the ACA was unconstitutional, "I suspect that Congress would re-enact those provisions with broad bipartisan support."

Greene noted, however, that "it remains to be seen whether a fractured Congress and the president can develop revisions to the law that would satisfy the courts and the American people."

Others predict that striking down the ACA would pave the way for Democrats to pass a national health insurance "Medicare for All" bill.

"As Democrats prepare to take control of the House, the party's left wing is eager to
open a new front in the health care wars," wrote Will Marshall, president of the Progressive Policy Institute, aliberal think tank, following the district court decision. "Emboldened by midterm gains and polls that show voters favor major changes in the U.S. health care system, they are demanding that party leaders make 'Medicare for all' a top priority in the new Congress."

Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.